GEORGE Osborne yesterday branded behaviour at Royal Bank of Scotland “totally unacceptable” after it was fined £391million for rate-rigging.

The Chancellor said taxpayers, who own 81 per cent of the bank, would not pick up the bill after RBS settled with UK and US regulators over Libor manipulation.

But further shame was heaped on RBS after anonymous emails were released showing the contempt traders held for the system.

Traders were revealed to have joked about fiddling the inter-bank lending rate in exchange for sex and sushi. In one email a City slicker promises to “come over there and make love to you your choice” if a trader manipulates the rate.

In another, after being asked “what’s it worth” to change a rate, a Swiss franc trader jokes: “I’ve got some sushi rolls from yesterday?”

RBS will recoup around £300million from its bonus pool and by clawing back previous awards. Investment banking boss John Hourican will leave with 12 months pay worth £775,000, but will forfeit £9million in bonuses.

Mr Osborne said: “What happened at RBS and other banks is totally unacceptable. Those responsible will face the full force of the law.”

What happened at RBS and other banks is totally unacceptable

George Osborne

He said the money from the fines would go to people who had showed the “best of British values”, including those who had fought for the country.

RBS is the third bank giant, after Barclays and UBS, to admit rate rigging – 19 more are being investigated.

RBS said 21 staff were involved in trying to manipulate interbank lending rates from 2006 to November 2010.

All 21 have left or been subject to disciplinary action and two managers with supervisory responsibilities have stepped down.

Matthew Sinclair, chief executive of the TaxPayers’ Alliance, said: “The focus of RBS bosses and ministers should be paying back the taxpayers who propped up the bank.

“They should sell our stake in RBS as soon as is practically possible [or] taxpayers will continue to be exposed to the repercussions of the bank’s actions.”